nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2018‒10‒01
seven papers chosen by
Erik Thomson
University of Manitoba

  1. Shackle: an enquirer into choice By Marina Bianchi; Sergio Nisticò
  2. The Behavioral Economics of John Maynard Keynes By Ronald Schettkat
  3. Protecting Property Rights as a Prerequisite for Successful Real Estate Investment: An Educational Game Approach By Karen McGrath; Tom G. Geurts
  4. The Role of Morals in Three-Player Ultimatum Games By CASAL Sandro; FALLUCCHI Francesco; QUERCIA Simone
  5. Multi-agent Economics and the Emergence of Critical Markets By Michael S. Harr\'e
  6. A Moral Framework for Understanding of Fair ML through Economic Models of Equality of Opportunity By Hoda Heidari; Michele Loi; Krishna P. Gummadi; Andreas Krause
  7. The structure of the environment and individual choice processes By Paulo Oliva; Philipp Zahn

  1. By: Marina Bianchi (University of Cassino and Lazio Meridionale); Sergio Nisticò (University of Cassino and Lazio Meridionale)
    Abstract: Despite the several attempts to rework Shackle’s ideas using alternative non-mainstream approaches, Shackle was and has remained an outsider in the economic discipline. Shackle, however, is not a man alone if we take seriously what he thought of economics, as a discipline concerned with a subject that is not self-contained but open-ended and impermanent. Starting from an assessment of Schackle’s understanding of choice as creative, an uncaused cause that happens in a present in which the future must be imagined and for which the past provides no satisfyingly complete anticipations, the paper argues that Shackle should be rescued from the role of a nihilist where he is often relegated. In this perspective, a fundamental key to assessing the richness, originality and anticipatory character of Shackle’s contribution can be found in the recent developments of several “friendly” disciplines such as the psychology of motivations and of self-rewarding actions, narrative as the “science’ of the possible and the role of calendar time in choice theory. In fact, all these novel re-thinkings can contribute and to the understanding of Shackle’s main point, that human (and therefore economic) agents are active, creative enterprisers, who cut the deterministic thread by injecting the new in history to come, in making a difference in the future courses of action.
    JEL: B31 D81 D91
    Date: 2018–03
  2. By: Ronald Schettkat
    Abstract: After the publication of Keynes’ “General Theory,” economics was frequently described as schizophrenia: (neo-) classical at the micro-level, but Keynesian at the macro-level. In actuality, Keynes’ revolution was, to a substantial part, based on the behavioral micro-foundations of the world we live in, which has been dismissed as ad hocery, or simply ignored or reclassified in the neoclassical synthesis. Keynes’ General Theory is truly general. It includes the full-employment equilibrium as a special case. In addition, its microeconomic foundations are broader than the extremely narrow behavioral assumption of the neoclassical model. Consequently, we argue that Keynes’ microeconomics – although not fully worked out - is actually revolutionary. This may be difficult for (neo-) classical economists to accept, but it is strongly confirmed by the recent results in behavioral economics. Keynes’ macroeconomics is the result of his microeconomics. Keynes’ theory is a criticism of (neo-) classical economics, where he offers alternatives from micro to macro. It is truly a general theory, micro and macro.
    Date: 2018–09
  3. By: Karen McGrath; Tom G. Geurts
    Abstract: Aim and Objectives: Geurts and Jaffe (1996) presented the results from an educational property rights game they created. This game teaches the students how a framework of well-protected property rights leads to more productive real estate investments. The aim of this paper is to improve on the explanations provided in that paper.Design / Methods / Approach: This is an in-classroom educational game, where students simulate production using real estate under varying levels of property rights protection. As such this is an interactive teaching method with a self- directed learning approach.Findings: It shows that the better their property rights are protected the higher the productivity. Although most of the actions of the students during the game could be explained, some of the outcomes seemed not rational. Indeed, Geurts and Jaffe wrote “We have noticed that peer pressure to work can hamper this process” with regards to irrational behavior. The authors of this paper attempt to expound on some of the unexplainable behavior in the Geurts and Jaffe paper and in addition provide some alternative views for the explanations provided in that paper, using a behavioral analysis.Research Limitations / Implications: Educational games are typically used to explain some theoretical concept in a self-directed learning approach, however the theory is often based on rational behavior. The outcomes of the educational game can therefore be different from what the theory predicts, which can be considered a limitation to the approach. However, a behavioral analysis, as presented in this paper, might explain the outcomes better and provide for a better learning experience for the students, since the outcomes can fully and/or better explained.Originality, Rigour and Significance of the Study: This is an original game developed by one of the authors of this paper, which was published in one of the top peer-reviewed journals of the field, namely the Journal of Real Estate Finance and Economics. This is of course no guarantee that this paper is of similar rigor and/or significance, however it shows the relevance of this topic and approach: Teaching students under which circumstances an investment in real estate is most successful.
    JEL: R3
    Date: 2016–12–01
  4. By: CASAL Sandro; FALLUCCHI Francesco; QUERCIA Simone
    Abstract: We experimentally investigate the role of moral concerns in three-player ultimatum bargaining. In our experimental paradigm, proposers can increase the overall size of the pie at the expenses of an NGO that conducts humanitarian aid in emergency areas. In a first study, we find that responders are not willing to engage in ?immoral? transactions only when fully informed about proposers? behavior toward the NGO. Under complete information, their willingness to reject offers increases with the strength of the harm to the NGO. Moreover, the possibility to compensate the NGO through rejection further increases their willingness to reject. In a second study aimed at gauging the importance of different motives behind rejections, we show that the two most prevalent motives are to compensate the NGO or to diminish inequality between responders and proposers. Punishing proposers? unkind intentions towards the NGO or rejecting on the basis of pure deontological reasons constitute less important motives.
    Keywords: mini ultimatum game; morals; experiment
    JEL: C72 C91 D64
    Date: 2018–09
  5. By: Michael S. Harr\'e
    Abstract: The dual crises of the sub-prime mortgage crisis and the global financial crisis has prompted a call for explanations of non-equilibrium market dynamics. Recently a promising approach has been the use of agent based models (ABMs) to simulate aggregate market dynamics. A key aspect of these models is the endogenous emergence of critical transitions between equilibria, i.e. market collapses, caused by multiple equilibria and changing market parameters. Several research themes have developed microeconomic based models that include multiple equilibria: social decision theory (Brock and Durlauf), quantal response models (McKelvey and Palfrey), and strategic complementarities (Goldstein). A gap that needs to be filled in the literature is a unified analysis of the relationship between these models and how aggregate criticality emerges from the individual agent level. This article reviews the agent-based foundations of markets starting with the individual agent perspective of McFadden and the aggregate perspective of catastrophe theory emphasising connections between the different approaches. It is shown that changes in the uncertainty agents have in the value of their interactions with one another, even if these changes are one-sided, plays a central role in systemic market risks such as market instability and the twin crises effect. These interactions can endogenously cause crises that are an emergent phenomena of markets.
    Date: 2018–09
  6. By: Hoda Heidari; Michele Loi; Krishna P. Gummadi; Andreas Krause
    Abstract: Equality of opportunity (EOP) is an extensively studied conception of fairness in political philosophy. In this work, we map recently proposed notions of algorithmic fairness to economic models of EOP. We formally show that through our proposed mapping, many existing definition of algorithmic fairness, such as predictive value parity and equality of odds, can be interpreted as special cases of EOP. In this respect, our work serves as a unifying moral framework for understanding existing notions of algorithmic fairness. Most importantly, this framework allows us to explicitly spell out the moral assumptions underlying each notion of fairness, and also interpret recent fairness impossibility results in a new light. Last but not least and inspired by luck egalitarian models of EOP, we propose a new, more general family of measures for algorithmic fairness. We empirically show that employing a measure of algorithmic (un)fairness when its underlying moral assumptions are not satisfied, can have devastating consequences on the subjects' welfare.
    Date: 2018–09
  7. By: Paulo Oliva; Philipp Zahn
    Abstract: Beginning with Herbert Simon [10], the literature on bounded rationality has investigated in great detail how internal limitations affect an agent's choice process. The structure of the choice environment, deemed as important as internal limitations by Simon [11], has been mostly ignored. We introduce a model of the environment and its interaction with an agent's choice process. Focusing on online environments where an agent can use filter and sort functionality to support his decision-making, we show, a choice process relying on the environment can be rationalized. Moreover, for sufficiently many alternatives, filtering and sorting are quick ways to choose rationally.
    Date: 2018–09

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